Enhancing the resilience of the gilt repo market – discussion paper feedback statement

This feedback statement provides a summary of the responses to the September 2025 discussion paper ‘Enhancing the resilience of the gilt repo market’ and outlines how the Bank intends to progress this work.
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• Discussion paper: Enhancing the resilience of the gilt repo market

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Published on

01 April 2026

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Executive summary

Improving the resilience of the gilt repo market is a central priority for the Bank and the Financial Policy Committee (FPC). The gilt repo market plays a critical role in enabling market-based funding, government cash management, and supporting UK financial stability and economic growth. Previous episodes of stress, including the March 2020 ‘dash for cash’ and the September 2022 liability-driven investment (LDI) episode, have shown the importance of strengthening the resilience in the gilt repo market to reduce the risk of market dysfunction and tightening of financial conditions in stress, which can have broader consequences for the real economy. Additionally, in recent years, the structure of the gilt cash and repo markets has evolved significantly, with multinational, leveraged hedge funds increasing their participation while more traditional investors, such as pension funds, becoming less active. In the face of these developments, the Bank’s view is that further action is needed to deliver structural improvements to the resilience of the gilt repo market. As such, the Bank is considering potential reforms to enhance the resilience of liquidity provision in stress, in collaboration with the Financial Conduct Authority (FCA), with input from HM Treasury and the UK Debt Management Office (DMO).

In this context, the September 2025 discussion paper (DP) Enhancing the resilience of the gilt repo market intended to start a conversation with industry on the effectiveness and impact of a range of potential reforms, including greater central clearing and minimum haircuts on non-centrally cleared transactions. The industry has engaged constructively with the questions posed in the DP, and the Bank is grateful for the rich feedback received. The Bank will continue engaging closely with market participants on the topics they raised in their responses as it progresses this important work.

Respondents were supportive of the Bank’s objective of enhancing gilt repo market resilience. They broadly agreed with the Bank’s assessment of gilt repo market dynamics and recognised that under certain conditions, behaviours in the gilt repo market can generate imbalances in the demand and supply of liquidity in stress. While respondents broadly recognised the benefits of the reforms proposed in the DP, they also raised concerns about the proportionality and potential negative spillovers of market‑wide measures such as a mandate for central clearing or the introduction of non-risk-sensitive minimum haircuts on non-centrally cleared repo transactions.

Respondents recognised that greater use of central clearing could help reduce systemic risks by improving counterparty risk management, reducing settlement risks, enhancing operational efficiencies and by providing some multilateral netting benefits. However, based on the current structure of the gilt repo market, firms emphasised that existing access barriers, operational constraints and cost considerations made central clearing unfeasible or uneconomical for most market participants. They would therefore welcome innovation in this space, such as the introduction of cross-product margining, and new access models. In addition, respondents flagged that, given the current structure of the gilt repo market, the balance sheet benefits driven by multilateral netting may be limited due to the role played by dealers in providing maturity transformation. Respondents also noted that greater clearing could generate liquidity pressures in stress due to the procyclical nature of centrally cleared margins. Respondents highlighted that greater reliance on a single central clearing counterparty for gilt repo could concentrate risks in the system. The Bank, however, judges much of this risk to be mitigated by existing supervisory and regulatory frameworks for central counterparties (CCPs) and intends to investigate this further. Some respondents also suggested that the costs and the operational and legal complexities associated with the introduction of a clearing mandate could negatively impact market participation and liquidity in the gilt cash and repo markets in normal times. However, respondents provided limited quantitative information on the scale of these potential impacts.

Respondents favoured the introduction of incentives to encourage greater voluntary adoption of central clearing and opposed the implementation of a market-wide mandatory requirement. The most cited incentives included: innovations to clearing models to allow greater access for non-banks, the introduction of cross-product margining to reduce margin costs, an expansion of the pool of acceptable collateral for centrally cleared margin (including variation margin), and the clearing of the Bank’s market operations such as the Short-Term Repo (STR) facility.

Most respondents were not supportive of the potential introduction of minimum haircuts (or margins) in the non-centrally cleared segment of the gilt repo market, particularly if not risk-sensitive, noting these would raise funding costs and potentially divert activity into other markets or instruments, reducing gilt market liquidity and price efficiencies. However, a small minority of respondents saw some merit in introducing risk-sensitive haircuts, noting that the balance of costs and benefits would depend heavily on the scope of application and calibration. However, respondents offered limited quantitative evidence on potential impacts.

Finally, respondents highlighted a range of additional options to enhance gilt repo market resilience. These included innovations to the Contingent Non-Bank Financial Institutions Repo Facility (CNRF) and the Sterling Monetary Framework (SMF). These innovations largely focused on improving operational, settlement and collateral management efficiencies. Other respondents proposed measures to reduce liquidity pressures in stress via less procyclical and more transparent CCP margin models. This proposal is consistent with the recommendation from international bodies such as the Basel Committee on Banking Supervision, Committee on Payments and Market Infrastructures, and the International Organization of Securities Commissions. Similarly, some respondents suggested widening the pool of acceptable collateral in the centrally cleared market. Several dealers and trade bodies also suggested targeted adjustments to capital requirements for gilt repo to reduce dealer balance sheet constraints. However, they did not provide quantitative evidence on how this could improve dealer balance sheet capacity in stress. Some respondents also proposed innovations to the existing trading infrastructure and processes to improve operational efficiencies and reduce settlement risks, such as the development of tri-party repo. Respondents also suggested exploring proportionate data collection enhancements to support transparency without adding frictions.

The Bank is committed to ensuring that the gilt repo market is well-functioning and resilient to stress. To achieve this goal, the Bank will continue working on the assessment and design of potential policies that enhance the resilience of liquidity supply in stress. This includes exploring changes in market structure that would enable the greater adoption of central clearing in the future, and how the obstacles to greater adoption identified by respondents could be overcome. The Bank will also explore measures to improve risk management practices and margining in the non-centrally cleared gilt repo market to enhance system-wide resilience. In addition, the Bank will continue to monitor and communicate its findings about activity in the gilt repo market and the risks from leverage in non-bank financial intermediation.

The responses to the DP provide valuable input and will inform the development of any potential policy. The Bank will continue to work in close partnership with industry and other UK and international authorities to progress initiatives that could support the resilience of the gilt repo market. The Bank will progress with this work over the course of 2026 and intends to publish a comprehensive update, including potential policy proposals, in early 2027.

The Bank will also announce any potential policies with adequate notice and sufficient implementation timelines to ensure that all market participants have sufficient time to input into the design of, and prepare for, any proposed changes.

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Introduction

Improving the resilience of the gilt repo market is a key priority for the Bank and the FPC. In its July 2025 Financial Stability Report, the FPC highlighted that the resilience of core sterling markets, such as the UK government bond (‘gilt’) cash and repo markets, is vital to ensure the financial system can absorb, rather than amplify, shocks, thereby underpinning sustainable economic growth.

The gilt market is a central pillar of the financial system and real economy owing to its role in government financing, its use as a benchmark for other asset classes, and its importance in regulatory requirements such as capital and liquidity standards. Related to this, the gilt repo market plays a critical role in ensuring the functioning of the gilt cash market, in transmitting liquidity throughout the financial system, and in supporting wider UK financial stability and the broader economy. Importantly, during periods of market stress, a resilient gilt repo market helps limit the risk and severity of disorderly deleveraging and fire sales by maintaining market participants’ access to secured funding, thereby supporting broader financial stability and maintaining investor confidence. The resilience of the gilt repo market is therefore needed to ensure that market participants are well equipped to self-insure and self-stabilise against a range of severe but plausible shocks. In turn, that minimises public authority interventions only in those cases where the market faces extreme shocks that threaten financial stability, such as the March 2020 ‘dash for cash’ and the September 2022 LDI stress.

Additionally, in recent years, global sovereign bond markets – including the UK gilt market – have undergone significant structural changes, with non-bank financial institutions (NBFIs) assuming a larger role. For example, as noted in the July and December 2025 Financial Stability Reports, multinational leveraged market participants such as hedge funds, are playing an increasingly important role in the gilt cash and repo markets, while traditional longer-term investors such as pension funds have become less active. Alongside these developments, central bank reserve levels have been declining.

In the face of these developments, the Bank’s view is that further action is needed to deliver structural improvements to the resilience of the gilt repo market. As such, the Bank is considering potential reforms to enhance the resilience of liquidity provision in stress, in collaboration with the FCA, with input from HM Treasury and the UK DMO.

The Bank published the DP Enhancing the resilience of the gilt repo market in September 2025. The DP intended to start a conversation with industry on the effectiveness and impact of a range of potential reforms to enhance the resilience of the gilt repo market, including greater central clearing and minimum haircuts on non-centrally cleared transactions. The industry has engaged constructively with the questions posed in the DP, and we are grateful for the rich feedback received.

Section 1 summarises the feedback from the industry, focusing on the topics highlighted in the questions included in the DP. In doing so, it reflects the Bank’s commitment to transparency and aims to promote and inform further engagement with industry on potential reforms. Section 2 outlines how the Bank intends to progress this work.

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1: Respondents’ views

1. The Bank received 40 written responses to the DP from a broad cross-section of gilt repo market participants and interested stakeholders. Respondents included buy-side (ie asset managers, insurers, and pension funds, including defined benefit (DB) schemes), sell-side (ie banks and dealers), infrastructure (including market infrastructure providers and market infrastructure trade bodies and groups) and trade bodies (representing a broad range of market participants including buy-side-only, or a combination of buy- and sell-side). During the response window, the Bank carried out an extensive engagement programme via bilateral calls and roundtables with gilt repo market participants.

2. There was some variation in the underlying policy and market structure assumptions made in the responses. For example, when responding to questions related to the benefits and risks of greater central clearing, some respondents assumed a market-wide central clearing mandate, others assumed a voluntary increase in the adoption of central clearing, while other respondents did not explicitly state their assumptions. Similarly, on questions related to margining and minimum haircuts on non-centrally cleared transactions, respondents’ minimum haircuts policy-design assumptions varied or were not explicitly mentioned.

1.1: Characteristics of the gilt repo market

1. Overall, respondents concurred with the DP’s assessment of the market dynamics which could impede the ability of the gilt repo market to absorb, rather than amplify, stress. There were mixed views amongst respondents around which channels would likely have the greatest impact on financial resilience during periods of market dysfunction. Respondents most commonly pointed to constraints in dealer intermediation capacity, market and counterparty credit risk limits, and high leverage in the NBFI sector as most likely to have the greatest impact. Many also noted how the procyclical nature of margin calls could cause liquidity pressures during periods of market volatility.

2. A small minority of respondents across the buy-side agreed with the DP’s description that near-zero haircuts in the non-centrally cleared market could lead to under-collateralisation and enable the build-up of high leverage at little cost. Most respondents noted that the current level of haircuts in the non-cleared market reflected firms’ portfolio margining practices and were effective from a counterparty credit risk management perspective. This is an area which the Bank intends to explore further, as it somewhat contrasts with previous findings that near-zero haircut practices in the government bond repo market are also the result of competitive pressures. [1] Additionally, respondents’ feedback did not seem to take account of the potential system-wide implications when leverage from NBFIs unwinds abruptly.

1.2: Greater central clearing: potential benefits, risks and trade-offs with market liquidity

Financial stability benefits from greater central clearing

1. A broad range of respondents identified several ways in which central clearing could provide financial stability benefits to the gilt repo market. However, many noted that the extent of such benefits was reliant on the clearing model offered by the CCPs and adopted by market participants.

6.The same respondents noted how greater central clearing of gilt repo could mitigate systemic risks by improving operational and settlement efficiency, and by reducing counterparty credit risk through greater opportunities to net exposures and a more standardised risk‑management framework. Within this, a group of respondents covering most types of market participants noted the potential operational efficiencies that could accrue under greater central clearing. These were, namely, greater automation and straight‑through processing, which could lower settlement risk and support more standardised margining and collateral management practices. Some also emphasised that greater central clearing could increase transparency, supporting firms and authorities in monitoring exposures, leverage and concentration risks. In addition, some infrastructure and buy-side respondents noted that, depending on the design and implementation of the clearing model, greater central clearing could offer more reliable liquidity provision during reporting period-ends and episodes of market stress.

1. Several respondents, including from trade bodies, sell-side and infrastructure suggested that the scope for potential netting benefits from greater clearing may be limited. This is driven by structural features of the gilt repo market, where dealer banks perform maturity transformation between short-term cash lenders (eg money-market funds (MMFs)) and longer-term cash borrowers (eg pension funds), limiting the scope for multilateral netting of long-dated or directional exposures and the consequent benefits to dealer balance sheet capacity. Respondents contrasted this with the US Treasury repo market, where activity is more concentrated at shorter – largely overnight – maturities, which generates greater netting efficiencies. In addition, some respondents in this group argued that much of the potential for dealer balance sheet netting had already been realised, given a significant proportion of the dealer-to-dealer repo market is already centrally cleared. They also noted that non-centrally cleared bilateral transactions already provide a degree of counterparty-level netting thereby limiting the scope for further netting if these transactions were centrally cleared. However, respondents did not specify whether this assessment was based on gilt repo flows during normal or stressed market conditions, nor did they provide quantified estimates of existing or expected netting benefits. Respondents also did not indicate whether this conclusion was based on their observation of the current market structure or the one expected to emerge as a result of greater clearing, where repo terms could evolve as dealers maximise their netting benefits. On the other hand, a smaller group of respondents across different sectors of the market suggested that if access and operational barriers were resolved, wider clearing could eventually support greater dealer intermediation capacity due to balance‑sheet netting benefits.

Obstacles to the expansion of central clearing

1. Several trade bodies and buy-side respondents flagged existing regulatory and operational barriers that limit firms’ ability to adopt or scale central clearing. These barriers included operational challenges and frictions in having to meet more frequent margin calls, as well as incompatibilities between clearing models and existing regulatory requirements that prevent some funds from joining a CCP. In this context, some buy-side respondents cited fund rules, collateral reuse restrictions, and restrictions under the Undertakings for Collective Investment in Transferable Securities and Money Market Funds Regulation frameworks, as constraints to the adoption of central clearing by certain fund structures.

2. Several respondents from the buy-side, trade bodies and sell-side also noted certain limitations to current access to central clearing for gilt repo, which is centred around sponsored access models. They noted a large number of NBFIs lack access to central clearing, while only a small number of banks offer sponsoring services. Within this group, some respondents flagged that existing features of the clearing models, such as the unavailability of done-away models [2] and lack of cross-margining across different products and across CCPs limit accessibility and increase costs.

Financial stability risks from greater central clearing

1. Many respondents across a variety of sectors – notably sell-side, trade bodies and buy-side – noted that greater central clearing could potentially exacerbate liquidity pressures on the NBFI sector during periods of stress. The responses appear to be based on different assumptions around the structure of the gilt repo market, as well as the level of clearing achieved in steady state, with many seemingly assuming a market-wide adoption of central clearing (either voluntary or mandatory) while market structure would remain unchanged. They argued that liquidity pressures that may emerge in stress could be further amplified by the procyclical nature of the CCP margin model and the requirements around the type of collateral CCP members can post as initial margin (IM) and the variation margin (VM). In particular, respondents cited cash-VM requirements as a key driver of cash liquidity needs of market participants who are net cash borrowers in the gilt repo market, such as pension funds and, within these, the DB schemes. Additionally, some respondents suggested that, had a broad-based central clearing mandate been in place at the time of the September 2022 LDI episode, there would have been more pressure on the gilt cash and gilt repo markets as pension funds would have sought to liquidate assets to post VM in cash. Market contacts also highlighted that the bilateral market exhibited a degree of forbearance during the September 2022 LDI episode, with some dealers allowing delays in collateral call payments. They noted that such discretion would not be available within the CCP default management framework, where delayed or missed payments would trigger the default management process, implying a potential higher number of defaults than in the non-centrally cleared market. However, liquidity and resilience standards in LDI funds have strengthened significantly since that stress episode and are now better positioned to withstand shock than they were in September 2022.

2. Additionally, some respondents warned that greater central clearing performed by a single UK CCP for gilt repo (as is currently the case) could create concentration and systemic risk concerns, which could be further amplified if a clearing mandate was introduced. However, the presence of a single CCP is common in centrally cleared markets, and the Bank judges much of this risk to be mitigated by existing supervisory and regulatory frameworks for CCPs. The Bank intends to investigate this further.

Cost of central clearing in normal times and implications for market functioning

1. Most respondents emphasised that higher CCP margin requirements, relative to the current near-zero haircuts in the non-centrally cleared market, would materially increase trading costs for gilt repo market users during periods of stable market conditions. A group of buy-side respondents and trade bodies warned IM and cash-only VM, clearing fees, and sponsor charges would increase trading costs in normal times for pension schemes, insurers, MMFs and smaller firms if a clearing mandate for gilt repo were introduced. Views on market pricing impacts differed, with some respondents across various sectors warning the higher costs could affect gilt market pricing, while a few others argued central clearing could improve gilt market pricing overall via greater liquidity and market resilience.

2. A broad set of respondents suggested that, if mandatory central clearing were introduced, gilt repo market activity could migrate to other markets or products (eg total return swaps). The respondents suggested that this could have a negative impact on liquidity and participation in the gilt repo and cash markets and ultimately impact the ability of marginal levered investors to absorb future gilt issuance. However, respondents provided limited quantitative estimates on the scale of such potential impacts.

Solutions for increasing the level of clearing

1. Based on the costs and obstacles flagged in their feedback, respondents consistently opposed the introduction of a market-wide clearing mandate, with many buy-side firms citing the need for more targeted solutions exempting those market participants that would be likely to face the greatest costs and risks, such as pension funds.

2. Respondents’ preference was for market participants to increase their adoption and use of central clearing voluntarily. Many respondents suggested measures that could incentivise such changes in behaviour. These included improving access to clearing infrastructure through expanding the number of sponsoring banks and introducing new, less procyclical margin models. Respondents from sell-side, infrastructure, buy-side and some trade bodies also suggested an expansion of the type of collateral that would be eligible to pay IM and VM beyond gilts and cash – though few gave specific examples. Several trade bodies, sell-side and buy-side respondents suggested allowing cross-margining across CCPs. Several trade bodies and a few sell-side respondents recommended changes to the regulatory treatment of centrally cleared repo for sponsoring banks under certain access models. A few respondents from trade bodies, buy-side and sell-side recommended enhancements to tri-party arrangements to support more flexible collateral allocation. These included improvements to collateral mobility and the adoption of delivery versus payment (DvP) tri-party as the standard settlement model to reduce operational frictions. Several trade bodies, and a few respondents from buy-side and sell-side suggested the Bank join the CCP and centrally clear its sterling market operations, including the STR facility.

1.3: Minimum haircuts on non-centrally cleared gilt repo transactions: potential benefits, risks and trade-offs with market liquidity

Financial stability benefits from minimum haircuts in non-centrally cleared transactions

1. Most respondents from across the spectrum of market participants were not supportive of an introduction of non-risk-sensitive minimum haircuts (or margins) in non-centrally cleared gilt repo transactions. They argued that non-risk-sensitive haircuts would introduce additional costs and be unlikely to address the key drivers of procyclical liquidity pressures. This contrasts with the feedback obtained in the Bank’s first system-wide exploratory scenario (SWES) [3] exercise where participants indicated that higher haircuts would often form a part of their willingness to continue to provide repo in stress.

2. Across the industry, a small minority of respondents noted potentially meaningful financial stability benefits from implementation of minimum haircuts via a reduction in counterparty credit risk. These benefits were, however, viewed as highly conditional on minimum haircut design and calibration. Within this group, some suggested that targeted, appropriately calibrated floors could provide a backstop against the most aggressive pricing in the non-centrally cleared market and promote greater resilience by curbing excessive leverage.

3. Respondents offered mixed views on whether setting haircut floors could limit procyclical increases in haircuts during periods of market volatility and reduce market and credit risks. A few respondents from the buy-side and sell-side viewed haircut floors as a way to reduce haircut procyclicality and make collateral demands in stress more predictable. On the other hand, several respondents from different industry sectors suggested that haircut floors would do little to prevent sharp increases in liquidity demand in stress.

Financial stability risks from minimum haircuts in non-centrally cleared transactions

1. Overall, respondents provided limited information on the risks to financial stability from the introduction of minimum haircuts on non-centrally cleared transactions. Some respondents argued that materially higher haircuts in normal times could encumber larger volumes of liquid collateral, and raise funding costs, potentially reducing gilt market liquidity and price efficiencies. A DB pension scheme and a few sell-side respondents noted how these same dynamics could lead to inefficient risk management decisions in the DB pension fund sector.

Potential impact on market participation and liquidity in normal times

1. Similar to their responses in relation to mandatory central clearing, most respondents across the buy-side, sell-side and trade bodies argued that the introduction of minimum haircuts could increase funding costs, relative to the status quo. This could result in a reduction in gilt repo market activity and liquidity. A group of buy-side and sell-side respondents, infrastructure, and trade bodies also warned that minimum haircuts could push activity into alternatives such as total return swaps, reducing gilt repo market depth and increasing opacity. A few of these respondents highlighted such dynamics could ultimately impact gilt pricing and the market ability to absorb future gilt issuance. However, respondents provided limited quantitative estimates on the extent of such impact on their strategies and the wider market. A few respondents from the sell-side and a trade body also flagged potential risks to the international competitiveness of the UK sovereign bond market, if the UK were to be a first mover in introducing minimum haircuts.

Implementation of risk-calibrated minimum haircuts

1. The small group of respondents who spoke to the benefits of introducing minimum haircuts also urged authorities to consider carefully their calibration to avoid a potential reduction in market liquidity and dealer intermediation capacity (via higher capital costs) and noted that the design should be considered alongside existing firms’ risk management frameworks and practices.

2. A few respondents from infrastructure and a trade body viewed counterparty‑specific or leverage‑based calibration versus a uniformly applied static floor as essential to avoid distorting LDI strategies or reducing liquidity for low‑risk users. Within this group, some suggested that minimum haircuts could vary by collateral and transaction characteristics, for example, higher floors for longer‑dated collateral and longer‑tenor repos, while short‑dated gilt repo backed by high‑quality collateral should face lower floors.

3. As an alternative to minimum haircuts, a few market infrastructure respondents proposed strengthening existing supervisory tools to ensure haircut and margin practices in the non-centrally cleared repo market were sufficiently prudent. A few sell-side respondents and a trade body recommended that haircut requirements form part of a broader toolkit, also encompassing bilateral IM frameworks, enhanced leverage monitoring or tailored supervisory guidance.

1.4: Other potential measures to enhance gilt repo market resilience

1. In responses to the DP, respondents suggested a number of potential measures, which could be implemented alternatively to, or in combination with, greater clearing or minimum haircuts.

2. Most respondents across dealers and industry bodies suggested that gilt repo market resilience could be enhanced via innovations to official liquidity backstops, measures to reduce margin procyclicality, and easing regulatory constraints on dealer intermediation. Several respondents from the sell-side and buy-side emphasised the importance of innovating the Bank’s liquidity backstops and market operations. Many of these respondents highlighted an expansion of NBFI eligibility to the CNRF and innovations to the wider SMF toolkit as key to enhancing gilt cash and repo market resilience by ensuring more predictable and operationally efficient support in stress. In this context, a small number of respondents (including a trade body) proposed more regular STR facility and Indexed Long-Term Repo (ILTR) operations, moving to a delivery-versus-payment model, [4] and introducing a tomorrow-next facility for the operational standing facility. Several trade bodies and respondents from the buy-side and sell-side proposed addressing margin procyclicality through smoother and more transparent CCP margin models, wider acceptance of non‑cash VM collateral and more risk‑sensitive IM frameworks, particularly for long‑dated gilt and LDI portfolios. Several trade bodies and sell-side respondents also pointed to dealer balance sheet constraints as a core fragility, suggesting targeted adjustments to leverage‑ratio capital requirements for gilt repo, and incentives to promote a more effective use of countercyclical tools which would be effective in generating additional intermediation capacity in stress.

3. A minority of respondents, across both buy and sell-side, proposed innovations around collateral mobility (also, for example, via tri-party arrangements) and operational resilience through harmonised collateral standards, more efficient settlement processes (including same‑day options) and reduced settlement fails. In this context, the Bank assesses that greater central clearing would likely make settlement processes more efficient.

4. A minority of respondents across infrastructure, trade bodies and buy-side also pointed to alternative repo models and innovation, referencing indemnified peer‑to‑peer structures, guaranteed repo and Distributed Ledger Technology or tokenised frameworks offering firms settlement efficiencies and greater transparency. Several respondents across various industry categories also supported proportionate enhancements to private and public disclosures to deliver insights on leverage and collateral dynamics.

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2: Next steps

1. The Bank is grateful to the industry for engaging constructively with the questions posed in the DP and for the rich feedback submitted in the responses.

2. The Bank is committed to ensuring that the gilt repo market is well-functioning and is resilient to stress. In this context, the Bank’s goal is to ensure that liquidity provision remains resilient in the face of market shocks and that market participants are well equipped to self-insure and self-stabilise against a range of severe but plausible shocks, with public authorities only intervening in the most extreme cases where there is a threat to financial stability.

3. Consistent with the feedback we received, we recognise that reforms in this space should be tailored to the specific features of the gilt repo market, as well as the diverse needs and roles of different market participants. We also recognise the need to target measures to maximise net benefits to financial stability, whilst minimising any side-effects including burden on the industry, and carefully consider any potential implications on the international competitiveness of the UK financial system.

4. In this context, the responses to the DP provide valuable input to the Bank’s thinking. They will inform the development of any potential policy, alongside evidence from historical stress episodes and the results of the SWES. As part of this work, the Bank will continue to engage with industry and welcomes further quantitative evidence from market participants that supports the points raised in their feedback.

5. The Bank’s view is that further action is needed to deliver structural improvements to the resilience of the gilt repo market. The Bank will therefore continue monitoring developments in market structure and participants’ behaviour and further consider the benefits and costs of potential market structure reforms. Specifically, the Bank will continue to consider potential reforms to enhance the resilience of liquidity provision in stress, continuing to work in collaboration with the FCA, with input from HM Treasury and the UK DMO. These include exploring changes in market structure that would enable the greater adoption of central clearing in the future, as well as exploring how the obstacles to greater adoption identified by respondents could be overcome. The Bank will also explore changes in market structure that would support more prudent risk management practices and margining in the non-centrally cleared gilt repo market to enhance system-wide resilience. Additionally, as part of further work in this space, the Bank will seek to draw on industry expertise and data to quantify the potential impact of any market structure reforms on market liquidity.

6. The Bank will progress with this work over the course of 2026 and intends to publish a comprehensive update, including potential policy proposals, in early 2027. The Bank will announce any potential policies with adequate notice and sufficient implementation timelines to ensure that all market participants have sufficient time to input into the design of, and prepare for, any proposed changes.

7. The Bank will also continue to work with other UK and international authorities to progress initiatives that could enhance the resilience of the gilt repo market. As part of this, the Bank will consider any international developments in this space, including the implementation of the securities financing transactions haircuts framework and the Financial Stability Board recommendations around leverage in non-bank financial intermediation and liquidity preparedness for margin and collateral calls. The Bank will also continue to monitor and communicate our findings about activity in the gilt repo market and the risks from NBFI leverage.

8. Alongside this work and as noted in the December 2025 Financial Stability Report, as part of the FPC’s UK bank capital assessment, one of the areas of focus is the implementation of the leverage ratio and the role of buffers in the leverage framework. Additionally, work on the Digital Securities Sandbox (DSS) continues to explore the use of tokenisation and new technology such as distributed ledgers to improve efficiencies in post-trade, which could for example facilitate faster movement of collateral. This follows the launch of the DSS by the Bank and the FCA in 2024, with firms currently preparing to apply for the ‘live’ stage of the DSS. The Bank will provide updates on these initiatives in due course.

9. For example, the 2023 PRA’s Fixed Income Financing Review, research by the US Office of Financial Research and the BIS Bulletin (2025).

10. Done-away models in CCPs allow buy-side clients to execute trades with one broker-dealer while clearing them through a separate agent clearing member. This model enables separation of execution and clearing.

11. For example, the Bank’s first System Wide Exploratory Scenario, published in 2024.

12. A DvP model is a securities settlement mechanism that guarantees that the transfer of securities (delivery) occurs only if the corresponding payment is made, simultaneously, or via atomic settlement.

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